What is Maryland's digital advertising tax, and why is it still being fought over?
Edvin Givargis Published 11 minute read
The short answer
Maryland's digital advertising gross revenues tax is a tax on the gross revenues a company derives from digital advertising services in the state, meaning banner, search engine, interstitial, and comparable advertising delivered on a website or application, with advertising on interfaces run by broadcast and news media entities carved out. It was enacted when the General Assembly overrode a gubernatorial veto in February 2021 and first applied to taxable years beginning after December 31, 2021. A company must file once its Maryland digital advertising revenue reaches $1 million, and the tax bites only if its worldwide gross revenue is at least $100 million; the rate is then 2.5, 5, 7.5, or 10 percent of the Maryland base, with the tier set by global revenue alone (Tax-General section 7.5-103). A companion provision barred companies from passing the cost to customers through a separate fee, surcharge, or line item (section 7.5-102(c)). The tax has been fought over ever since, and the fight is not finished. The Supreme Court of Maryland sent the first challenge back without reaching the merits, holding that challengers had to go through the Comptroller and the Maryland Tax Court. The federal courts, barred from hearing attacks on the tax itself, struck down the pass-through ban under the First Amendment in 2025. Then, on August 14, 2026, the Maryland Tax Court held the tax itself invalid under the federal Internet Tax Freedom Act, the dormant Commerce Clause, and the Due Process Clause, and ordered 2022 refunds with interest to the three companies before it. Those decisions resolve three refund claims, not the statute; they are subject to judicial review in the circuit court, the tax remains on the books, and every other company in scope has to decide how to protect itself while the appeals run.
How the tax is built
The tax is imposed on a person's annual gross revenues derived from digital advertising services in the state (section 7.5-102(a)). The assessable base is that Maryland-sourced revenue, and the Comptroller's regulation sources it by device: the numerator counts devices that accessed the advertising services from a location in Maryland, the denominator counts devices that accessed them from anywhere, and devices whose location cannot be determined drop out of both without any adjustment to the revenue being apportioned (COMAR 03.12.01.02). The taxpayer determines location from the totality of the technical and contractual information in its possession, such as IP address, geolocation data, device registration, and cookies. The Comptroller's Technical Bulletin No. 59 (July 11, 2025) reads the statute to reach advertising that is programmatic, delivered by automated, algorithm-driven workflow, and conveyed visually.
The rate structure is what makes the tax unusual, and what ultimately drew the constitutional objections. The rate does not depend on how much advertising a company sells into Maryland; it depends on the company's global annual gross revenues from all sources. A company with $1,000,000,000 of worldwide revenue pays 2.5 percent of its Maryland base; one more dollar of worldwide revenue moves it to 5 percent on the entire base. On a $10 million Maryland base, that single dollar doubles the tax from $250,000 to $500,000. At the top tier, above $15 billion of global revenue, the rate is 10 percent of the Maryland base, however little of the global revenue that set the rate has any connection to Maryland.
Compliance runs on its own calendar. A person with at least $1 million of Maryland digital advertising revenue in a calendar year files an annual return under oath by April 15 of the following year; a person that reasonably expects to exceed $1 million files a declaration of estimated tax by April 15 of the current year and quarterly estimated returns by June 15, September 15, and December 15 (section 7.5-201(a) and (b)). At least 25 percent of the estimated tax is due with the declaration and with each quarterly return, and any unpaid balance is due with the annual return (section 7.5-301). Returns must be filed electronically for periods beginning after December 31, 2026 (section 7.5-201(d)), and the taxpayer must keep records of the services provided in Maryland and the basis for its calculation (section 7.5-202).
Three forums, three different questions
The first challenge went to the Circuit Court for Anne Arundel County, which granted summary judgment to the challenging companies on federal statutory and constitutional grounds. The Supreme Court of Maryland vacated that judgment and directed dismissal in Comptroller of Maryland v. Comcast of California, Maryland, Pennsylvania, Virginia, West Virginia, LLC, No. 32, Sept. Term 2022 (Md. July 12, 2023), holding that the administrative remedies in the Tax-General Article are exclusive and must be exhausted in the Tax Court first. The court said expressly that its ruling rested on no view of the merits. The General Assembly has since tightened the administrative path further: legislation effective January 1, 2026 adds the tax to section 13-508, so a company assessed after December 31, 2025 has 30 days to apply for revision or, if it pays, claim a refund, or the assessment becomes final.
The federal challenge took a narrower route because it had to. In Chamber of Commerce of the United States v. Lierman, 90 F.4th 679 (4th Cir. 2024), the Fourth Circuit held that the federal Tax Injunction Act barred the federal courts from hearing claims against the tax itself, but not the First Amendment claim against the pass-through ban, which regulates what a company may say to its customers about the tax rather than the collection of the tax. On that claim the Fourth Circuit held in Chamber of Commerce v. Lierman, No. 24-1727 (4th Cir. Aug. 15, 2025), that section 7.5-102(c) facially violates the First Amendment, observing that states may not forbid regulated parties to talk about their regulations unless the restriction survives First Amendment scrutiny. On remand the district court entered final judgment on October 15, 2025 (Civil Action No. 1:21-cv-00410-LKG, D. Md.), declaring the provision facially unconstitutional and permanently enjoining the Comptroller from enforcing it against the plaintiff associations' member companies, current and future. The ban never prohibited a company from raising its prices to absorb the tax; it prohibited only the separately stated charge.
The merits of the tax itself finally reached a decision in the Tax Court. In Apple Inc. v. Comptroller, No. 23-DA-OO-0456, Google LLC v. Comptroller, No. 23-DA-OO-0649, and Peacock TV, LLC v. Comptroller, No. 23-DA-OO-0654 (Md. Tax Ct. Aug. 14, 2026), each involving tax year 2022, the court granted summary judgment to the taxpayers. It held that the tax discriminates against electronic commerce in violation of the Internet Tax Freedom Act; that the global-revenue rate structure fails the fair apportionment, nondiscrimination, and fair relation requirements of Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), because the rate turns on worldwide revenue unconnected to Maryland activity; and that the same feature violates due process by severing the tax from any rational relationship to in-state values. In Peacock the court also held that the carve-outs for broadcast and news media entities discriminate by content and are impermissibly vague under the First Amendment, while ruling for the State on a foreign Commerce Clause claim. Each order directs a refund with interest.
Those orders are not the end of the matter. Any party to a Tax Court proceeding, including the State, may seek review in the circuit court, and the Tax Court's order remains enforceable during review unless the reviewing court grants a stay (section 13-532). The Comptroller has done so: on September 10, 2026 it petitioned the Circuit Court for Anne Arundel County for judicial review of the Google decision (In the Matter of Comptroller of Maryland, No. C-02-CV-26-002374), and as of September 28, 2026 the docket showed no motion for a stay. The State can pursue that review, and nothing about the stakes suggests it will let the decisions stand unchallenged; the path runs through the circuit court and likely the Appellate Court and Supreme Court of Maryland before the question is settled. In the meantime the decisions bind only the parties before the court for the year at issue. They do not repeal section 7.5-102 and do not relieve any other company of the filing obligation in section 7.5-201.
The Internet Tax Freedom Act argument, and the states watching
The strongest argument against the tax has always been federal and statutory rather than constitutional. The Internet Tax Freedom Act, 47 U.S.C. section 151 note, bars any state from imposing multiple or discriminatory taxes on electronic commerce (section 1101(a)). A tax is discriminatory if, among other things, it is not generally imposed and legally collectible on transactions involving similar property, goods, services, or information accomplished through other means (section 1105(2)(A)(i)), or if it imposes the obligation to collect or pay on a different person than in the case of similar transactions accomplished through other means (section 1105(2)(A)(iii)). Maryland taxes an advertisement displayed on a website or in an application; it does not tax the same message printed in a newspaper, broadcast on television, or posted on a billboard. The State's answer was that programmatic, algorithmically targeted advertising is a different service, not a similar one delivered through other means. The Tax Court rejected that distinction on the statute's plain language, finding digital and non-digital advertising services similar and the difference in treatment exactly the discrimination the Act forbids. The Apple decision also rejected the State's contention that the Act, applied this way, unconstitutionally commandeers state taxing power.
The litigation matters well beyond Maryland because the Maryland statute has served as a template. Bills modeled on it have been introduced in a number of legislatures, and the policy discussion has moved toward designs intended to answer the discrimination argument, such as taxing targeted advertising regardless of the medium that carries it rather than digital advertising alone. At least one medium-neutral design of that kind has already drawn a court challenge before taking effect, pressing the same Internet Tax Freedom Act theory on the ground that a facially neutral tax operates in practice only on internet advertising. Other proposals have taken different paths entirely, such as taxes measured by the collection of personal data. The Maryland appeals will shape how far any of these designs can go: a final appellate holding that digital and traditional advertising are similar services under the Act would make any tax confined to digital advertising difficult to sustain, while a reversal would invite imitation.
Practice notes
A company that meets the $1 million Maryland threshold should keep filing and paying while the appeals run, unless and until a statutory change or Comptroller guidance says otherwise; the August 2026 decisions bind only the three petitioners, and a company that stops filing on the strength of them risks assessment, penalties, and interest if the State prevails on review. The more urgent task is protecting the right to recover what has been paid. A refund claim may not be filed more than three years after the date the tax was paid (section 13-1104(a)), and because estimated payments are made quarterly, each payment starts its own clock; measured from late September 2026, every payment for tax year 2022 and most estimated payments for tax year 2023 are already beyond reach for a company that never filed a claim. For tax year 2023, a payment made on the December 15, 2023 due date remains claimable until December 15, 2026, and the annual balance paid on April 15, 2024 until April 15, 2027; payments for tax years 2024 and 2025 age out on the same schedule through 2028, and an early payment starts its clock on the day it was made. Protective refund claims, filed with the Comptroller for each open payment and pursued through denial to the Tax Court as Comcast requires, preserve the right to share in any final victory; a company that waits for the appellate outcome may find its oldest years closed. Assessed companies should calendar the 30-day window in section 13-508 for any assessment issued after 2025. On contracts, the pass-through ban can no longer be enforced against members of the challenging associations, and the provision has been declared facially unconstitutional, but a company outside that group should review with counsel whether and how it states the tax on invoices while the statute remains unrepealed. Both platforms and advertisers should also look at existing tax-reimbursement and price-adjustment clauses for a question few drafted for: if the tax is refunded, who is entitled to the money a customer paid through a surcharge. Advertisers buying from platforms carry no direct liability, but they should know which of their contracts carry the charge. G&G State Tax Group provides digital advertising tax exposure review and refund claim representation alongside its state and local tax practice.
This article states the law as of September 28, 2026
Statutes, rates, thresholds, and agency practice change, and a different set of facts can change the answer. Before acting on anything discussed above, contact G&G State Tax Group, or another state and local tax adviser, to confirm what has changed since this was written and how the rules apply to a specific situation.
This publication is informational in nature and is not, and should not be considered, legal, accounting, tax, or other professional advice for any person or situation. Correct application of tax law depends heavily on the facts and circumstances in each case, and G&G State Tax Group, LLC assumes no liability in connection with the use of this information, and is not obligated to inform any reader of changes in the law or other factors that could affect the information contained herein.